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One step closer to a UAE Federal Arbitration Law

The UAE government has announced that the Federal National Council has approved the draft Arbitration Law. In this briefing, we look at the next steps for this important piece of legislation, and the scope of its application.

Legislation to deal specifically with arbitration has been long awaited by UAE practitioners and the business community alike. Early drafts of this law were widely circulated and commented on as far back as 2007. Today's news of the FNC's approval of the draft law is a promising sign that this is the next significant law to be issued in the government's agenda for legislative reform.

Arbitration is an important part of the UAE's modernising economic reforms. It is one of the measures to be taken to attract foreign investment into the country, alongside the new Commercial Companies Law, the Bankruptcy Law and the UAE VAT and excise tax legislation, all of which have been issued in the last few years.

The expected publication of the Arbitration Law will be of interest to all UAE based businesses, and to those with UAE contractual partners. It underlines the government's commitment to provide resolution mechanisms for commercial disputes based on international norms.

What is the FNC and what will happen next?

The Federal National Council is the UAE advisory parliament. Under Article 90 of the UAE Constitution, the FNC examines all draft laws, following preparation of a bill by the UAE Cabinet of Ministers.

If a draft law is approved by the FNC with no amendments, the law will be submitted to the President of the UAE for approval and presentation to the UAE Supreme Council, which is comprised of the Rulers of each of the seven Emirates of the UAE. If ratified by the Supreme Council, the President signs and promulgates the law.

The law must be published in the Federal Gazette within two weeks of promulgation by the President, and the default position is that it comes into force one month from the publication date, unless it provides for a different effective date.

What is likely to be in the new Arbitration Law - scope of application?

At this stage, we know the scope of application of the Arbitration Law. This was outlined in the UAE government press release. The Arbitration Law will apply to:

arbitration proceedings which take place in the UAE, unless the parties have agreed to apply a different arbitration law to govern the proceedings, provided that the other arbitration law does not contravene public order and public morals in the UAE.

arbitration proceedings which take place overseas, if the parties have agreed that the subject matter of the arbitration will be subject to the UAE Arbitration Law.

any arbitration to settle a dispute arising from a legal relationship in relation to which the application of UAE law is mandatory (other than as expressly excluded by specific provisions).